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Technical Analysis Fallacy

  • #461
  • Dec 10, 2007 7:49am Dec 10, 2007 7:49am
Quoting fti
I repeat.
The only way to manage a win AND a loss position is by size snowballing.
There is no other way. One increases the profitabilty bottom line and the other a recovery protocol.

Snowballing your positions in a win situation to to enhance and stretch the profits in the book.

Snowballing in a loss situation is very tricky,
The trick is to stay on the front line, and not allowing the market to run too far away from you for effective salvaging the bad . Therefore averaging of cost is the main component in this MO. Later in Art of War you will learn that to save 1 bad postion , you will need a squad. Therefore the timing is critical and the terrain whereby this is allowed to occcur must be manageable. This MO must be given sufficient thought , well parametered and executed swiftly on running battle sequences. If any possibilities of failure were to present itself , the whole exercise have to be abandon. So use it wisely. Under the strength of unlimited capital, this activity will dig you out of the holes , a trader might find themselves in. But traders do not have unlimited resource as with banks, if this protocol is adopted then much preparation is necessary, in terms of the limits of the parameters is concerned.

Remember that every loss you swallow, based on the WW tables, will put you off geometrically. So to a trader a 10 cts profit is a 10cts profit whereas a 10cts loss is not exactly that, its more. To keep books healthy, loss taking is a very detrimental exercise.
Try to be profitable , a small profit is better than a very small loss, by leaps.

regards

for viability, you must understand, the martingale, fibonacci and log arithmetic spirals. Their workings, the empirical formulation and their characteristics. The secret working lay in the pi & its skew.
Allright, thank you, see your point. Had some sussesfull battles using this concept, but to be honest never thought that I was doing the right thing. I do use the snowballing to maximize profits, I actually try to use Gann's square to judge the move and the strategic possibilities, golden spiral as well. Got the point about the skew, makes total sense, thanks.
  • #462
  • Edited 10:20am Dec 10, 2007 10:06am | Edited 10:20am
Hi ALL,

@ Zoran,
I see you are not new to damage control.
Bringing books back to flat, that even is an uphill task.
So you can understand my concerns, that if inexperienced traders ( even experienced) did that regularly, cos' I taught them to. They may fall into the class of traders that add to losses, and thats not right.

Damage control is the hardest to impliment. Of course we can stay off that,
but then the maths will work against us.
So how can it be implimented safely,
If I ever discover , how to make money without taking risk, I will share with all,
But for now, thats the only way to save book. (There's no other way)
Thats why I am very carefull about casually taking trade positions.
One will never know when , the rescue is required.

Of course if we are so good that, every trade is a walk in the park. Then why bother.
In reality , this cannot happen. Most gurus I have come across, just advocate , cutting the loss. Get on with the next profitable trade.
But in reality unless , such gurus have no real experience,they wouldn't just say that, like if it was their money. They next trade may just be a repeat.
If traders won 50 % of all their trades and lost 50% , the net result is probably a drain of close to 25% of capital. So in effects trading is not such an easy thingy.

Sun Zi said.
"A general who has not fully mastered the art of extemporaneous responses may know the terrain like the back of his hand, but will not be able to exploit this to his full advantage."

"He wins his battles by making NO MISTAKES. Making no mistakes is what establishes the certainty of victory, for it means conquering an enemy that is already defeated."

I, having been a pro, have survived by making little mistakes.
Small mistake are corrected to become small gains,
Big mistakes, I have sacrificed my time energy and resilence,(sometimes fighting huge battles over 2 to 3 days without sleep to recover from) to overcome and come out flat.
Of course there have been mistakes taht were unrecoverable from.
but I make them relatively negligable in contrast to the annual profits in my book.
I owe it all to right mindset, guts, good MM and strategic thinking.
Most of all unwavering dedication, as this is was rice bowl. (bread & butter, if pleases)
How then, can I teach ( this ) to those that yearn to learn, it is very uphill task, but I am trying.

Like some of the dealers , I have trained have remarked,
if the possitions is rotten, get fti, he'll fix it.
But the truth is I am only I, the best I can do is train a few good ones,
the rest I will have to leave you, in your own battles,
Hoping that what I have said to you have given you the foundation to spring from, cautiously.

Like I have mentioned , when you are young in the trades, start small build slowly and prudently. It an ants job.
If you think that with your money you can come into forex and take as you wish, I emplore you to think again, carefully.
Draw a line , ride the trend moves, Truly easier said than done.

To ride day positions, is good when you have already nested big profits as foreign capital to risk.
Unless you can make good decisions, in the short term,
I would wonder, how longer term decisions making can be more accurate.
Ultimately we trade in the short term, even if positions were to be held for the longer,
they are still filled in the short term.

The only difference is that in the longer term positions, as you mention, you cut out the "noice" of short term fluctuations, by providing a larger pain threshold.
If the decision was wrong , a longer term perspective would still be wrong.
Hope, may help survive the position, but thats left to the gods to decide.
No form of analysis or decision process is infallable. Risk is just that risk.
My feelings is better to be wrong, in the short term, and try to correct that in the longer term when necessary, than to be wrong in the long term and be immobalised.

God's truth ,"As above, So Below"

In the short term positions, there is the short fluctuations,
similarly for longer term positions, they have their fluctuactions as well.
But for me I feel that the short terms is less painful, when mistakes are made,
and can be carried over to the longer term for re-analysis, re strategise and recovery.
There is no wrong or rights, only mindset, objectivity and ability to cope.
This tempered with proper foundation in managing risk and the wisdom of knowledge, should stand us in good.

Yes MO= Modus operandi

Whether I will present Sun Zi's Art of War is not decided yet.
This literiture is an ancient manual of wisdom and is freely available.
If you google it, there are numerous copys and interpretations of it.
If God willing and time permits, I may try to show you a read of the text from my perspective.
Nevertheless it wouldn't harm if you first read it in your leisure to have a glimse of the wisdom within contains.

What I am presented in terms of the MM is already very dangerous, to the uninitiated. Coupled with The Art of War Strategies & Strategems , it becomes very potient material.
I have to decide very carefully, if its reveiling is appropriate.
(or whether parental and senior citizens guidance may be required, LOL)
Please have patience , while I ponder this issue.
Howerver , I have given within this thread, enough material to keep much of you busy until the turn of this decade. I hope you will read carefully esp where there are things between the lines,and give it due thought and consideration and practise, as I grapple with the issues.

Your empathy is much appreciated.

regards
  • #463
  • Dec 10, 2007 10:07am Dec 10, 2007 10:07am
Quoting valterroque
I have been reading you posts from beginning, and I found them the best stuff that i have read here in FF. I must say that I am not good English speaking, so sometimes have a little problem understanding some of your story's, I maybe understand better when the apply to charts. Anyway i have ordered the books that you recommended because i really want to understand and learn how to trade in forex and other markets. If you have the time to teach us who am I to not have the time to read your posts (10X) if its needed to understand. THANK YOU so much for your efforts.

Towards everybody that is participating in this threat a want to tank you all , for sometimes asking the questions that i cannot formulate myself.

Towards Leighsww, thank you to for convincing FTI to teach all of us.

Kind regards
Valter

@ valterroque
Thank you for your kind words.
I hope the thread may be enlightening for you in your quest.

regards
  • #464
  • Edited 10:24am Dec 10, 2007 10:08am | Edited 10:24am
Quoting fti
How come you don't re analyst after moves?

Yes, I was wondering why you didn't pull out at that point as well (the new resistance as FTI has drawn). Do you move your stops to cover new support/resistance as it appears? 10pips or so the other side should have been your max loss..

Just my .02c worth

D.

**edit: Just read your replies - damn this thread grows quick lol**
  • #465
  • Edited 10:32am Dec 10, 2007 10:11am | Edited 10:32am
Quoting Zoran
Could you please clarify this? I can see that loss taking can be detrimental so it could be carried and snowballed so long as it is in the direction of the continuing trend. Is this what you are referring to as you would expect your unrealised loss to eventually come good. However, could this also distract from taking other positions? Would you take a position in the opposing direction (or hedge)?

However, I can see the danger in this also as some wrong analysis could snowball into a disaster. There must come a point where a bad position is closed. Do you have any rules of thumb? Such as 1% or 2% of an account?

Finally, is there an ideal initial position size? I can see the turtles had a forumla to calculate this. Do you have anything similar?
@ Zoran,
The answer is yes and no.
When a position is snowballed, as in this case progressively,to catch up with the front lines, the risk and exposure entails.
Therefore such strategies should only be used when there is potential of squaring looking forward. I give you and example.

If I was to trade a 5 min time scoped position
and it gets it self into miss timing the dance, it would be in a loss.
The only way that this position can be salvaged is if the hourly time scope has presented opporyyunity for a possible salvage attempt.
Otherwise any attempt to snowball the position would only serve to its own detriment.
If the time scope opportunity presented it self only in the weekly tenure,
it would be better to "bite the bullet" and take the pain. (loss)
So in reality there is a limitation of whether snowballing should be attempted and to what parameters (ie what type of annual profits are already in the bag, which we can utilise as risk capital).

As you so rightly pointed out , if snowballing was effected, It would have to be in the prospective trend direction, otherwise , such opportunities would never have surfaced.

Please do not think that all bad positions should be salvaged.
There are some trades that are not miss timed , but rather off trend and totally sunked.
It would be fool hardy to even entertain the notion of trying to save such pridictcament.

In terms of rule of thumb,risk parameters,
I used to work within the scope of 50% of annualised book profits and or 10% of my trading lines which ever was larger.

There is no ideal formulation for risk adventure,
but most pros work on the basis of dividing the risk capital,10X
and then a tenth of that resultant. which puts the initial exposure in a pittance state.
And most of us do not use leverage as basis calculus.
However if leverage was utilsed, it should reflect the principal at risk rather than the value at risk basis.

For traders of retail Forex, most of our calculus would be unacceptable.
As Leighsww may have mentioned , that I did a demo experiment and I doubled a 50,000 account in 24 trades trading sparingly with a 100% R/R.
I later did a risk to ruin analysis and found it unacceptable.
So I opened another account and did the trade to acceptable Risk of ruin,
and made average 1.30 cts a day, which humoured Leighsww till she was rolling on floor.
Sometimes over a 24 hr period I made 30 cts.
I am now using a 100,000 account with increased ruin factor and am still experimenting daily to find that equilibrium.
Just for info, I have now factored implied volitility into the formulation.
So in fact I am yet inconclusive.

regards
  • #466
  • Dec 10, 2007 10:28am Dec 10, 2007 10:28am
Quoting Daemien
Yes, I was wondering why you didn't pull out at that point as well (the new resistance as FTI has drawn). Do you move your stops to cover new support/resistance as it appears? 10pips or so the other side should have been your max loss..

Just my .02c worth

D.
@ Daemien,

If I was in the position,I would have attempted, without stop loss orders.
but rathertrying to cut that loss with attempting to liquidate as per where i pointed out.
There would be slippage in that exercise, and with my accrument, its highly possible that the slippage would be in my favour, mostly. If stop loss oredrs were placed it is of high probability of the sweeps taking good positions out without regards to market pulse reading.
And the slippage if any whould normally be against the trader.

By the way , which pair was that?

regards
  • #467
  • Dec 10, 2007 10:42am Dec 10, 2007 10:42am
Quoting gene22
Allright, thank you, see your point. Had some sussesfull battles using this concept, but to be honest never thought that I was doing the right thing. I do use the snowballing to maximize profits, I actually try to use Gann's square to judge the move and the strategic possibilities, golden spiral as well. Got the point about the skew, makes total sense, thanks.
Hi Gene,

I see you have fougt those undeserving , scary battles as well.
Averaging market killings is good, huh
Make you feel on top of the world, after the whole exercise.

Doesn't your squaring Time/Price, plots and the spiral plots get in the way, for the market feel?
For me it breaks my chart up into Quadrants and make very unrelistic feel.
Like fighting in a boxing ring.
I am glad you understood , about the sk.
You are quite experienced trader, no?

regards
  • #468
  • Dec 10, 2007 11:05am Dec 10, 2007 11:05am
Quoting fti
Hi ALL,

@ Green_David,
I do remember that you did posted a chart for my analysis,
I have not replied your post because you posted a daily chart,
And based on the chart , that market has moved into a range congestion.
Within that congestion time window
is where you will be hinted on the new possibilities that can develop.
What I want to tell you is that instead of trying to impose analysis on the chart,
one viewing of it already can tell you what to expect of the possibilities.
It is what it continues to form as time progresses that is more important.

Resistance and support levels are never absolute.It changes as time progresses.
Your trade positions must change as the chart progresses and a continued analytics be done.
DO NOT try to read it once and have a set mind of the possibilities of what to expect.
The analysis is an on going process and every new bar added will cause new developments.
Never read the patterns that form on the chart, rather recognise it when it forms,
and follow it with a trade position.
Chart patterns can mutate as time advances
and a fixed perspective to the pattern that has formed is dangerous
as it palalyses your ability to change when the dance changes.
Althought it is foundational that you should be able to read the pattern formations,
you should not draw those lines on to your chart.
They can form optical illusions to your mind and
impair your ability of new developments that is coming onstream in the charts.

Follow the development as I explain Zorans chart errs to him.

regards
Thank you, Master. That's exactly my problem. After price action analyzed, I set up a potision. When the market goes another way, I would update my analysis, but unfortunately the hope would come to me intead of cool and rational analysis. I think I need to build up correct mindset to solve this problem.

Your hog story is great! When I scalp, I got accustomed to some patterns of price movement, and have obatained a bad habit. As I am feeling very good, then the market's trap is ready just to get me and make me lose more than I got. I think that is reason why you said there is no rules in trading.

Best regards to you. (I copied all your words and charts, I will take some time to read them again.)

Thank you fti for your efforts.

David
  • #469
  • Dec 10, 2007 11:13am Dec 10, 2007 11:13am
Hi David,

I m glad for you, that these postings are helping you, consolidate your trading form.
Keep it up friend.
In future, please don't call me Master, makes me feel uncomfortable.
( Like in Igor the Hunchback, yes master, hahahaha )
Look at it this way , I am a trading friend.

regards
  • #470
  • Edited 11:29am Dec 10, 2007 11:15am | Edited 11:29am
Quoting fti
Hi ALL,

@ Zoran,
Whether I will present Sun Zi's Art of War is not decided yet.
This literiture is an ancient manual of wisdom and is freely available.
If you google it, there are numerous copys and interpretations of it.

I have to decide very carefully, if its reveiling is appropriate.
(or whether parental and senior citizens guidance may be required, LOL)
Please have patience , while I ponder this issue.
Howerver , I have given within this thread, enough material to keep much of you busy until the turn of this decade. I hope you will read carefully esp where there are things between the lines,and give it due thought and consideration and practise, as I grapple with the issues.

Your empathy is much appreciated.

regards
Thank you for the detailed response. You are certainly correct in that you have provided an abundance of material. I shall look at Sun Zi's Art of War and read it at my lesuire (whenever that may come)

Please don't hesitate to reveal anything of worth, even if that little bit of knowledge may be dangerous to some. You only have to visit the threads to see there are already many dangers to them. At least we have Leigh here to provide some parental guidance.

Are you intending to go over some technical analysis you follow? Like some basic chart patterns? I am not familiar with your stepping tops. Your M and W patterns remind me of some harmonic patterns I follow although yours seem to form from double tops and bottoms.

Thank you once again.
  • #471
  • Dec 10, 2007 11:48am Dec 10, 2007 11:48am
Quoting fti
Hi ALL,

Mom every one.
While was typing out all the replys , I missed the good up run in EUR/USD.
So now I am claiming 10 pips from eveyone.
Every body open a demo account now and transfer me 10 demopips to me.
Just joking.
Reply you later, ok. Now trying to capture counter trend pips, this bad trading strategy.
Lets see if its possible, even for me.

regards
If the Fed/CB announced intervention, then we are likely to go down more right? This looks like a right shoulder formation on the 4hr or daily (back to the low 1.4500 area?). Here are my ten pips..... pip pip pip pip pip pip pip pip pip pip

Which demo platform are you using? MT4 is the best (live and demo) I've used.
  • #472
  • Dec 10, 2007 12:04pm Dec 10, 2007 12:04pm
fti,

your posts are awe inspiring, they just ooze of an enormous amount of knowledge and experience, please keep up the good work.

I love the fact that you are teaching us in the "deep end". Please keep going at the same accelerated pace, whatever we/I may not get right away, with a few re-reads of your posts they all sink in.

nothing better than trading naked in the deep end........
trading naked.......
  • #473
  • Dec 10, 2007 12:18pm Dec 10, 2007 12:18pm
Hi All,
I'm newbie here n i think this is interested topic to learn more about market structure n rhytm of market.
just share my simple mind, sometimes to feel market rhytm, I imagine my self as market movers like CB,bank dealer or exporter/importer. sound funny but it works to me.
for example if I were a bank dealer, the questions are what prices my positions, in what position i should maintain or hedge, when i have to take profit or if i loss what i have to do to resolve all my positions.
If I were Japanese exporter, in short term I need more dollar to anticipate oil price next year, then strong yen will stabilize my export price.

that's just my imagination...
Ps: sorry for my english
to Mr. Fti, thanx for the lesson. i need more to learn n advise
  • #474
  • Dec 10, 2007 12:30pm Dec 10, 2007 12:30pm
Quoting Zoran
At least we have Leigh here to provide some parental guidance.
ACK, didn't I say, NO calling me "mommy"?!! You deserve a spanking!! http://leighswishingwell.com/lp/emotes/bottom.gif
  • #475
  • Dec 10, 2007 12:46pm Dec 10, 2007 12:46pm
Quoting leighsww
ACK, didn't I say, NO calling me "mommy"?!! You deserve a spanking!!
haha, well I had a choice of either parental or senior citizen. The choice was simple don't you think?

PS. Now I've found your website. Can I throw a penny in it?
  • #476
  • Dec 10, 2007 12:47pm Dec 10, 2007 12:47pm
[quote=fti;1752193]Hi ALL,



Of course if we are so good that, every trade is a walk in the park. Then why bother.
In reality , this cannot happen. Most gurus I have come across, just advocate , cutting the loss. Get on with the next profitable trade.
But in reality unless , such gurus have no real experience,they wouldn't just say that, like if it was their money. They next trade may just be a repeat.
If traders won 50 % of all their trades and lost 50% , the net result is probably a drain of close to 25% of capital. So in effects trading is not such an easy thingy.


Sorry if you have covered this elsewhere in the thread.

Surely, if you have a method that gives you an edge in the market, cutting short your losses is part of beating the odds but only if your MM strategy ensures that your wins are bigger than your losses. So, if your strategy allows for 60% losses at X pips, your wins (profit targets) must be several times the amount of X pips to be profitable. Therefore, losses are essential to your strategy as this reinforces your discipline to trade the system to its fullest potential based upon probabilities of wins/losses.

Also, if you spend time nursing a losing position that has no stops, wouldn't that money be more useful to finance other potential trade setups? In the time it has taken to nurse a trade back to healthy pips or breakeven, you could have closed it for a smaller loss but capitalised on trades with greater RR for example?
  • #477
  • Dec 10, 2007 1:09pm Dec 10, 2007 1:09pm
Quoting Zoran
haha, well I had a choice of either parental or senior citizen. The choice was simple don't you think?
ACK ... oh yes, very wise choice then, haha :

Quoting Zoran
PS. Now I've found your website. Can I throw a penny in it?
Wha?! Only a penny? How about a pip? lol

------

Okay, I guess we gotta wait and see if fti is gonna post his Art of War thingy. I'm sure he will. If he hesitates, I'll give him a spanking, too, lol :
  • #478
  • Edited 1:30pm Dec 10, 2007 1:20pm | Edited 1:30pm
Oh, for those of you who get quotes not coming out right, you need to make sure that you have an end quote after the quoted text. Here's an example:

Inserted Code
[quote.=person's name]their text goes here[b][color=Red][/quote][/color][/b]
You see how there's a quote tag at the beginning of the text (I had to put a period so that this forum script treats it as text instead of quoting, lol, so there shouldn't be a period after the word "quote" for the first code tag), and then a closing quote tag at the end.

Sometimes when you hit the QUOTE button, and you start removing parts of the text in the quote, that closing quote tag might have gotten removed by mistake, so just enter one manually like I show (make sure that the closing tag has a forward slash (/) in front, otherwise it won't be valid). That'll fix it to make the quote appear correctly (thus easier for us to tell which is the quote and which is your comments)
  • #479
  • Dec 10, 2007 3:21pm Dec 10, 2007 3:21pm
I still don't get it. Your are long in a 5 min chart. The market turns against you. You look at a 1 hr chart and the trend is down, you bail out? The trend is still up, you increase your position or just ride it out? Looking for a more detailed MO.
  • #480
  • Dec 10, 2007 3:39pm Dec 10, 2007 3:39pm
[quote=leighsww;1752465]Oh, for those of you who get quotes not coming out right, you need to make sure that you have an end quote after the quoted text. Here's an example:
[quote]

OK Leigh, got it!

Webfoot, I think you have the basic idea there, but there's probably more to it. You may want to check 4hr chart and other things before bailing out (for a loss) as it would truely have to be a bad position to get to that stage.
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